SERVICES: SECTOR BY SECTOR
Distribution services
In all countries, distribution represents a large share of domestic economic activity and employment. The sector is highly dynamic and changing rapidly, with a trend towards the rapid development of new forms of supply — for example, through electronic commerce.
The distribution sector provides the necessary link between producers and consumers, within and across borders. The efficiency of the sector is crucial to ensuring that consumers have extensive access to a wide variety of goods at competitive prices.
Distribution services include wholesale trade services, retailing services, franchising and commission agents' services. The sector is diverse, covering various formats (fixed location stores, electronic commerce, door-to-door sales, markets etc.), outlets (hypermarkets, supermarkets, department stores, convenience stores, small shops), product offerings (food vs. non-food, multi-product vs. specialized goods, etc.) and legal structures (e.g. independent, integrated groups, franchises).
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Current market access commitments and most-favoured-nation (MFN) exemptions
In contrast with its economic importance, the sector has attracted a relatively low number of commitments, as 82 members, half of the WTO membership, have specific commitments on distribution services. Wholesale trade services and retailing services have a higher level of commitments than commission agents' services and franchising. Members' commitments sometimes exclude the distribution of certain products.
The limitations in relation to market access and national treatment typically relate to mode 3 (setting up subsidiaries to provide services in another country) and include foreign equity restrictions and economic needs tests (a government determination of whether a particular service or supplier is economically needed). Only three members have listed MFN exemptions for distribution services.
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Like other sectors, distribution services were included in the services negotiations that began in 2000. Various negotiating proposals were submitted — by developed and developing countries — in the first years of the negotiations. In the negotiating proposals, many members lamented the low number of members with commitments in the sector. The proposals highlighted a number of restrictions which significantly affected trade in the sector and which should be addressed in the course of negotiations.
The barriers pinpointed included: foreign equity limitations; economic needs tests on establishment and expansion of stores (a government screening for the purpose of deciding whether the entry into the market of a foreign firm is needed); limitations on the type of legal entity, including joint-venture requirements; limitations on the scope of operations (e.g. number of outlets, geographical areas); discrimination against franchises or direct selling as opposed to other forms of business; discriminatory taxes and subsidies; discriminatory limitations on the purchase or rental of specific assets, such as real estate and land; citizenship/residency requirements; and performance requirements on the marketing of domestically produced goods.
Furthermore, several of the negotiating proposals sought a reduction or elimination of the product exclusions in the schedules of several members. Following the exchange of bilateral requests for market access, offers of improved commitments were exchanged among members.
- Proposals on distribution services
Following the Hong Kong Ministerial Declaration of December 2005, the sector was the focus of a plurilateral request , whereby a group of eight developing and developed members specified to a group of about 20 members the types of improvements they were seeking in the negotiations. The request sought commitments without limitations for modes 1 to 3 throughout the sector. However, the proponents indicated a willingness to discuss flexibilities regarding such issues as the exclusion of a limited number of sensitive products, transition periods, and certain non-discriminatory economic needs tests.
Information on negotiating objectives expressed by members is contained in reports from the Chair of the negotiations issued in 2005 (TN/S/20 and TN/S/23). An assessment of the negotiations across various sectors and areas is available in the Report by the Chair of the Special Session of the Council for Trade in Services to the Trade Negotiations Committee in 2011 (TN/S/36).
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